Analysis: New Jersey Facing Hefty Price Tag For New Rail Tunnels

Agreement on cost share for use of Northeast Corridor line and rail tunnels behind schedule, but federal law will make NJ pay more

Credit: U.S. Department of Transportation

New Jersey entrance to the two century-old tunnels that carry Amtrak and NJ Transit trains into New York City

With the two century-old tunnels that carry Amtrak and NJ Transit trains into New York City badly damaged by superstorm Sandy and facing eventual year-long shutdowns for needed repair, Amtrak officials are reshaping their $13.5 billion Gateway tunnel project into a “rescue operation” that would focus on building the new rail tunnels first and worry about expanding Penn Station later.

Congress is certainly expecting New Jersey to pay more: The Amtrak reauthorization law passed three years ago directed the Northeast Corridor Infrastructure and Operations Advisory Commission (NEC) to develop a new cost allocation formula that would ensure that there is “no cross-subsidization of commuter, intercity, and freight rail service.” The purpose is to make sure that NJ Transit and the seven other state commuter rail systems from Massachusetts to Maryland pay their fair share of both operating and capital costs with no hidden subsidy from Amtrak, whose federal subsidy is constantly under attack in the GOP-controlled House.

While the commission has already missed last Thursday’s statutory deadline for implementation of the new cost-sharing formula, NJ Transit Executive Director Veronique Hakim, who represents New Jersey on the commission, acknowledged at a recent Alliance for Action forum that NJ Transit would undoubtedly end up paying more for its use of the Northeast Corridor to run commuter trains between New York and Philadelphia.

New Jersey Transit’s daily commuter ridership of 211,000 on the Northeast Corridor mainline was second only to New York state’s 340,000 daily commuters on the Metro North and Long Island railroads, according to a 2013 NEC study. Hakim said she expected NJ Transit and the other state agencies to get “more of a say” over scheduling and usage of the Northeast Corridor, which is owned by Amtrak, in exchange for paying more for operational use.

But the big question is how the cost share will be apportioned on major capital construction projects. The most important are the Gateway rail tunnels, which could cost $7 billion to $10 billion, the planned $1.5 billion construction of two new rail bridges with four tracks to replace the dilapidated two-track Portal Bridge over the Hackensack River between Kearny and Secaucus, and the $1.5 billion replacement of the two-track “Highline” elevated rail line with a four-track line running from Newark to the Hudson River rail tunnels.

“If the new formula is based on number of passengers or number of trains using the Northeast Corridor, we could end up paying a lot more,” said Martin E. Robins, director emeritus of Rutgers University’s Alan M. Voorhees Transportation Policy Center.

During the commuter rush hour, for example, 20 New Jersey Transit commuter trains and only four Amtrak intercity trains use the trans-Hudson rail tunnels. The original Gateway plan called for 13 NJ Transit trains and eight Amtrak trains to use the new rail tunnels during the morning and evening rush. Extrapolating that cost share to the Gateway construction would put New Jersey on the hook for 62 percent of the cost – or $4.3 billion to $6.2 billion, if the Gateway tunnels cost $7 billion to $10 billion to build.

“You can’t put together a plan for the replenishment of the Transportation Trust Fund without setting aside money for the Gateway tunnels,” said Janna Chernetz, New Jersey Advocate for the Tri-State Transportation Campaign.

While Forward New Jersey, a pro-transportation business-labor coalition, recommended increasing funding for highway, bridge, and mass transit projects under TTF from the current $1.6 billion a year to $2 billion annually, that may not be enough to cover Gateway, extension of the Hudson-Bergen and Gloucester County light-rail lines, and other projects needed to spur New Jersey’s economic growth, Chernetz said.

How much money the state needs to put into TTF for the Gateway tunnels and for other critical projects like the replacement of the Portal Bridge will be determined by the cost-allocation formula the six-year-old Northeast Corridor Commission eventually approves. While recommendations were due to the federal Surface Transportation Board for review more than three years ago, negotiations among the various stakeholders on the commission have proved to be more difficult than expected, although one federal official who asked not to be named said an agreement could be reached as early as this winter.

Amtrak is not waiting for the Northeast Corridor Commission to come to an agreement -- or for New Jersey officials to sign onto a Gateway funding formula. Amtrak is spending $30 million to $40 million this year on preconstruction work, and the Obama administration pumped $185 million in Sandy infrastructure funding into the construction of an 800-foot-long concrete “tunnel box” under the Hudson Yards in Manhattan for trains using the new Gateway tunnels to run through.

While completion of the full Gateway project, including a multibillion-dollar expansion of Penn Station, is needed to maximize ridership capacity, the realization that flood damage to the two 1910 rail tunnels by superstorm Sandy would require their closure for repairs within 10 to 20 years led Amtrak to change its priorities.

“Given the findings of that report, we focused on the need to build new tunnels that could handle traffic from the old tunnels because each one will have to be closed for a year for repairs,” said Amtrak spokesman Craig Schulz. “So it’s full speed ahead on the tunnels. Including the environmental and design work, we estimate it will be a 10-year process if everything aligns the way we hope it will, and the funding is there.”

Schulz said Amtrak is considering all options to speed up the project, including construction by a public-private partnership, which Assembly Transportation Committee Chairman John Wisniewski (D-Middlesex) suggested as an option last week.

One advantage of a public-private partnership, Robins said, is that Amtrak could negotiate a fixed price with the private contractor, who would then be responsible for any cost overruns. Christie cited his fear that New Jersey would be responsible for billions in potential cost overruns on the $8.7 billion ARC tunnel as his reason for pulling out of the contract, then used $3.5 billion in Port Authority and Turnpike Authority funds diverted from the cancelled tunnel to refinance the TTF without having to raise the gas tax.

“Can the repairs (to the damaged tunnels) wait that long?” Schulz asked. “They’re going to have to. We just have to hope the tunnels last that long. We looked at the structural integrity of the tunnels and found they were not compromised. The risk is that the tunnels will continue to deteriorate to the point where it’s just not reliable enough to operate.

“If we get to that point, we will have to close the tunnels one at a time. The problem is there are only two tracks, so we would have go from 24 trains an hour at peak ridership to six trains an hour. Obviously, that would have a crippling impact on the region’s transportation system,” he said, because 160,000 rail passengers a day pass through the existing Hudson rail tunnels.

Schulz noted that there been ongoing discussions about cost-sharing on the Gateway project apart from the Northeast Corridor Commission’s deliberations on an overall cost-allocation formula for the eight states that share the line with Amtrak.

“Everybody realizes that this is not just an Amtrak issue, it’s a regional issue, because so many people rely on a Hudson River rail tunnel,” Schulz said. “We’re going to do what we can to bring people together, but we certainly cannot sit around waiting for other people to come to the table. Whatever the final numbers are, we know it’s going to be a hefty price tag.”